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Ukraine: messed up with or without Putin

March 14, 2014

We’ve all been following events in Ukraine — so that’s where Crimea is! — but it’s useful to take a broader perspective. Ukraine has a long and distinguished history, but under the Soviets and since independence in 1990, economic performance has been underwhelming.

If you run the numbers, you find the usual for underperforming countries: low productivity growth and poor governance. GDP per capita is about $7k. In neighboring Poland it’s about $20k, and in the US about $50k. On governance: Recently departed president Viktor Yanukovych was a crook on a massive scale. Predecessor Yulia Tymoshenko also seems to be a crook, although there’s ongoing debate whether she broke any laws amassing a fortune. Doing Business ranks its economic institutions 112th in the world; Poland is 45th. Transparency International ranks it 144th in control of corruption; Poland is 38th. In technical terms, the place is messed up. If and when they come to some arrangement with Russia, they still need to build more effective economic and political systems.

A colleague from the region adds: “You can say the same about pretty much every country in the former Soviet Union — and maybe Romania and Bulgaria, too.”

Update: Another colleague adds: “The comparison with Poland is problematic. It implies the two countries were similar in 1990, and they weren’t. The central-eastern-European countries (Poland, Czech Republic, Slovakia, Hungary) had past experience with democratic, market-oriented, capitalist organization of the society. And they were always part of Western civilization, only briefly separated from the West by the iron curtain. The Ukraine was never in this position, most of it has been part of the Russian empire for centuries. It is very difficult to build a democratic society if you have no history of it to build on.”